Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Now accepting keynotes for 23Q4-24Q2
Every year, I create three main presentations. For 2023, they are:
Delusions of determinism: Why planning for success leads to failure
Regression toward the meme: Why modern leadership continues to fall into old traps
Under pressure: Retail in a new financial era
If you want to book me for your event, workshop, or corporate speaking slot, just send me an email. To make sure I am available, however, please do so at your earliest convenience; my schedule is filling up fast - and I will be raising my prices at the end of the year.
More information can be found here.
A couple of updates before we go-go
Huzzah! The kitchen is nearly done. Although we are venturing close to other famous last words, some time next week, I may be able to go back to decently normal life (well, after a day or five of cleaning). The thought of sitting down to do work without constant noise in the background is nearly orgasmic.
WPP Stream was, as ever, very good. It is always nice to meet friends old and new, but I will be honest: replacing the building site in which I have lived for nearly a month with a private condo, warm weather, and a swimming pool was even better.
I also seized the opportunity to lead a couple of discussions on topics that we cover in the book - and interest was high. In fact, even though one of my sessions was in the worst spot of the resort and at the same time as Rory Sutherland running a workshop on “the new creative canvas”, I still managed to pull a decently sizable audience. Feedback was excellent too. Happy days.
Moving on.
What to Do When You Don’t Know What to Do
Adaptive strategy in an age of uncertainty
As most will be aware, Steve and I yesterday hosted the first out of what will become a series of three webinars (a massive thank you to those who came and Doug Maarschalk for moderating). The reason for the split, as opposed to a one-and-done, is simple: an hour is not enough time to cover what stands to be one of the most knowledge-packed business books in recent memory.
I do not say that lightly, nor in a fit of hyperbole. As previously discussed, it is common practice to stretch ten-page hypotheses to 300; the idea being that the real money is made on the speaking circuit where ten pages are just about right for a keynote. Our approach is.. ..different. Each chapter is its own book, in a sense, and thus very difficult to summarize in a matter of minutes.
First, because we need to get it out of the way, the title: What to Do When You Don’t Know What to Do. We are, admittedly, rather fond of it. The title came out of a conversation that Steve once had with an academic on what a course on strategy ought to be called. The academic said he it was a great idea, but that nobody would come if his university were to use it. We are betting on the opposite.
Second, the premise. Steve and I got the idea of writing the book partly because there are so few available that authentically represent the reality that most organizations face on a daily basis, but also because a hell of a lot has happened in science since the days of Newton. If that appears an odd reference, it is not; Isaac Newton was the originator of the causal determinism that we still see in strategy to this day, and the belief that if we merely do A, then result B will be guaranteed. Now, yes, obviously there is a bit more to it than that (much as we discussed during the session and will elaborate upon in the book), but it is fundamentally true.
However, while physics have moved on with the introduction of quantum theory and Kauffman’s third paradigm, strategy has firmly remained in the Enlightenment era in more than mere metaphorical terms. The book makes a conscious attempt to change that.
Third, the setup. The book has three distinct parts: the past, the present, and the future. As you may already have surmised, Part I deals with the ideas in relevant history (particularly neoclassical economics and strategic management theory) that came to reign despite a jaw-dropping lack of evidence to support them. Part II covers the problems that arise in everyday practice as a result, and Part III explains in very pragmatic terms what to do about it, while introducing the ABCDE and ICE frameworks, respectively.
Given that what I am describing may appear theoretic, it is important to stress that the book ultimately is about practice. If you just want to pick it up and start using it immediately, you can absolutely skip the first parts and get right into it. But if you are interested, or are considering teaching our work, then the theoretical underpinnings are there to find. We have nothing to hide and invite critical analysis.
Anyway.
After we had discussed all of that above (and highlighted the differences between traditional strategy and our brand of adaptive strategy), we began looking into what has gotten us to this point. As I alluded to above, much of our inclination towards determinism and an assumption of order (i.e., the idea that we may be sole masters of our future success) comes out of Newtonian mechanics. The notion took perhaps its most famous form in Laplace’s demon, a vast intelligence able to calculate with precision all that which had existed and ever would exist. It was an extreme illustration of what Newton had argued, but nonetheless followed. Most of us see its Mephistophelian shadow on a daily basis; facing almost any strategic problem, the solution is typically “more data”.
As with any new dominant paradigm, the ideas that took over physics eventually made it into other fields of study in the name of “enlightenment”. One of them was economics, which thereto had been much closer to philosophy in approach. It is here that things start to get worrying.
It began with a man called Marie-Esprit-Léon Walras, born in 1834 in Evreux, France, less than 60 miles from Laplace’s birthplace in Beaumont-en-Auge. Although the pair shared a geographical proximity, there were few signs that their intellects also did; Walras was on two separate occasions rejected from the prestigious École Polytechnique due to poor mathematical skills. Eventually, he managed to get accepted to the less renowned École des Mines, but soon failed his engineering training for the same reason.
After he had unsuccessfully attempted to also give banking and writing the old college try, Walras was more or less fed up with life. He turned to his father, who observed that economics was not yet a hard science; no mathematics were really used. This presented both an opportunity and a problem. On one hand, there was a chance to do something where there was nothing. On the other, the younger Walras was, as had become painfully apparent, not exactly a mathematical prodigy.
His solution was the equivalent of looking over the shoulder of a classmate to see what they had done; he simply copied a bunch of equations from books on statistics and mechanics, and uncritically introduced them into “the rational science” of economics under the assumption that markets functioned like physics.
That there was no actual evidence to suggest that this was the case was neither here nor there, nor has it been thought of as much of a problem since. Most modern concepts can be, in one way or another, traced back to Walras’ work in so much as they are not challenges to the theory but attempts make it work. Equilibrium theory, utility theory, the assumption of consumer rationality - all are efforts to solidify what is spectacularly uneven ground.
A perfect illustration can be seen in Arrow and Debreu’s Nobel Prize winning general theory of competitive equilibrium. At its core is the very same notion of causal determinism that Newton created, Laplace built upon, and Walras lifted into economics: a presumption that one would be able to pre-state all dated contingent goods. To use their own example, this means that one would be able to identify, a hundred years in advance, what the price of a bushel of wheat, sold in Oregon, on a rainy Wednesday after the Boston Red Sox have won the World Series, would be.
A child would be able to see through it; it is a nonsense. Nobody a century ago would have been able to predict what the price of a secondhand iPhone sold on eBay at the height of the pandemic would be. For that matter, none could have predicted the iPhone or eBay (and we can prove it).
And yet, we continue to make the same kind of errors in analytical judgment without thinking about it. If we just collect enough data, we will be able to predict the behavior not just of our competitors and any invention they may come up with, but also of buyers who, rational as they are, will do precisely as we predict provided that we give them the right decision parameters.
If you think that this is bad, we have only just gotten started. Next week, we will cause all kinds of controversies as we begin to dig into a couple of key figures in strategic management history, including a person who up until now has been almost universally loved.
Until then, have the loveliest of weekends.
Onwards and upwards,
JP
This newsletter continues below with additional market analyses exclusive to premium subscribers. To unlock them, an e-book, and a number of lovely perks, simply click the button below. If you would rather try the free version first, click here instead.